Input Tax Credit under GST means the credit of input tax paid on purchases, which the taxpayer can use it towards payment of output tax charged on sales. ITC comprises of credit in form of IGST, CGST, SGST / UTGST or Cess paid on the purchase of input goods, capital goods and input services that are used for business purpose.
If the tax paid on purchases is more than the tax paid on sales, the taxpayer can carry forward the Input Tax Credit. He can use it for payment of tax in future or claim the refund.
Mr.X is a manufacturer of garments. He buys cloth as input and pays GST of Rs.400. GST payable on sale of garments is Rs.1000. When he files his GST Return, he can utilise the input tax credit of Rs.400 and needs to pay a tax of Rs.600 only.
Under GST, the taxpayer can claim ITC of goods to pay GST on services and vice-versa. This was not possible under VAT or Service Tax. Further, the ITC mechanism removes the cascading effect i.e. tax on tax. The taxpayer can use the credit of tax paid at one stage of a supply chain to pay tax at a subsequent stage. Eg: IGST paid on manufacture of a product can be used for paying IGST or CGST and SGST on the sale of the same or any other product also.
The taxpayer can view the balance of accumulated ITC in his account on the GST Portal. Follow the below given steps to view the balance of ITC:
Login using your valid credentials on GST Portal
Click on Ledgers > Electronic Credit Ledger
(Note: You can view the E-Credit Ledger for a maximum period of 6 months only)
The E-Credit Ledger or Input Tax Credit Ledger reflects the self-assessed Input Tax Credit from the monthly returns. It has four categories i.e. IGST, CGST, SGST/UTGST and Cess. The taxpayer can use this balance for paying tax dues only. They cannot use it for paying dues of interest, fee or penalty.
ITC cannot be taken beyond the month of September of the following FY to which invoice pertains or date of filing of an annual return, whichever is earlier. The underlying reasoning for this restriction is that no change in return is permitted after September of next FY.
A taxpayer who has not availed the eligible ITC of any previous months may avail such ITC in any of the subsequent months, but anytime-either before the filing of the annual return or filing of the GST Returns for September belonging to subsequent financial year, whichever is earlier.
Section 17(4) (g) states that input tax credit shall not be available in case of goods lost, stolen, destroyed, written off or disposed of, by way of gift or free samples. Therefore, input tax paid on taxable goods which becomes waste and is sold as scrap is not eligible.